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I t was a year of mobile as wireless base has overtaken wireline base and is also adding up a sizeable number every month. The overall number were not attractive but GSM numbers were rosy whereas CDMA number was rather gloomy as Monsoon Hungama' was missing. On GSM front, Bharti, BSNL and Hutch gave good numbers whereas in CDMA is still Reliance which is the star attraction for handset vendors but it could not create hungama in CDMA.

In volume terms, India witnessed a total addition of around 15.4 million phones in FY 2004–05. GSM contributed around 79.5 percent, i.e., around 12.2 million whereas CDMA contributed around 20.5 percent, i.e., around 3.16 million. For GSM there was growth of around 49 percent whereas CDMA had a negative growth of around 44 percent.

In value terms, India's mobile market in FY 2004–05 was to the tune of around Rs 8,805 crore in comparison to Rs 7,785 crores in FY 2003–04. Overall, the market grew by around 13 percent. GSM contributed around 84 percent whereas CDMA contributed around 16 percent. The overall handset market did not do very well due to CDMA handsets not picking up in the Indian market. For GSM, growth was around 76 percent whereas for GSM it was around -61 percent.

CDMA Versus GSM
In the handset category, GSM was the star attraction and Nokia the star player. Nokia was the market leader in GSM with a market share of around 62.3 percent whereas in CDMA it was LG with a market share of around 59 percent.

For CDMA, the distribution channel is through operators though a few vendors are also working on a direct model. But the significant portion of revenue comes through offers bundled with operators' offerings. Vendors like Nokia opted for both the models-operator driven as well as directly through Brightpoint.

For GSM, the distribution channel is through distributor followed by retailers is the general practice. Some companies like LG have their own setup for marketing of GSM phones in the country.

Companies like Siemens and Alcatel have lost their touch in the Indian market and their space was taken by new players like BenQ, Bird, Philips, and Panasonic. In GSM there were new entrants in very high-end category as well as in the low end ones. In very the high end, some of the active companies were: Blackberry, Krome, O2, and HP. In low- to high-end categories, new players active and/or planning to be active are Haier, ZTE, Huawei. In CDMA, Chinese players like Haier, ZTE, and Huawei made their presence felt and are planning to launch models in all the categories.

The Players
Nokia leads the market in GSM as well as the overall handsets category but it will have to do a lot on the CDMA front where LG has a significant market share. Nokia has a market share of around 55 percent and is way ahead of its competitors. The success of Nokia can be attributed to its large range of models and a good channel strategy. The company launched more than a dozen models in GSM and around six in CDMA in the last fiscal. HCL Info and Brightpoint are its all India distributors for GSM and CDMA respectively.

On the distribution front, Nokia has more than 95 stockists, who cater to a channel strength of around 35,000 in A, B, and C class cities. The company also has around 450 Nokia Priority dealers, more than 50 Nokia care centers, and 100 franchisee-managed operations.

LG and Samsung ran neck to neck for the second position. LG had a market share of 11.8 percent whereas Samsung had a market share of 10.5 percent. With CDMA not doing well, LG's revenues were badly affected. As in the past, majority of its revenue comes from Reliance Infocomm. In the GSM category, LG focused on color and camera phones whereas in CDMA it was in all the segments. In the last financial year, it launched four 3G models: U8110, U8120, U8130, and U8138. These handsets can provide live video streaming, video conferencing, 3D gaming, continuous video recording, auto launch browser, and 384 kbps download speed.

Sasmung was in the third position with a market share of 10.5 percent. The company did well in GSM and was placed second in that category. In last financial year, Samsung launched phones with many differentiating features in the in clamshell and slider categories. The phones launched were: E700-the first multi-shot camera phone; SGH X600-first bar phone with rotating camera and flash; E800-high-end slide phones. On the CDMA front, it launched world's slimmest phones, which did well in the market.

Motorola came in at number four with a combined market share of around 8.6 percent. The company has to do a lot of catching up both on the CDMA as well as GSM fronts. The company has to first rectify its distribution network: it is based on regional/state basis and it does not have an all-India distributor. The company has recently launched low-end phone in Rs 1,700 category, to cater to the masses. Rugged in nature, these phones have long talk times as well as standby periods so that they can adapt to the erratic power situation in rural areas.

Sony Ericsson did extremely well on the high-end phones and is ranked at number five, followed by Kyocera, which did well due to its Tata Teleservices account. BenQ focused on color-, camera-, and PDA-phone versions. The company also signed up with Adonis, a service arm of Onida, for providing after sales support.

The Trends
Monochrome phones contributed 60 percent and 40 percent came from the colored category. In terms of bar phones versus clamshells, the shift is more towards the bars and they contributed around 85 percent. With changing times, and with increase in data usage, one will see an increased usage of clamshell phones in the country as they afford a larger viewing screen for the users and larger margins for the vendors.

In terms of classification, the Indian market is divided into eight categories-monochrome, basic color, color step up, color camera, color camera step up, color camera video, color camera video step-up, and smartphones.

Phone prices are coming down by around 15 percent and in cases where prices are not coming down, customers are getting more features at a lower price. The catalysts for mobile phone growth are: color, camera, and music. And in music specifically-FM and MP3 were the favored ones.

In order to compete in the Indian market, vendors are focusing mainly on differentiating factor to promote their products in the Indian market. Price cannot be a differentiating factor here as the market leaders drop their prices to match those of any pretender. All this affected margin adversely, which were in the range of three to six percent-depending on the handset category.

Drop in customs duty as well as slashing of airtime rates by operators helped the explosion in GSM and fueled the market for future growth. Manufacturing took a front seat due to PLC (product life cycle) reducing from 12 months to six to eight months.

All these resulted in manufacturing of phones becoming attractive in India. Local manufacturing helps the vendors to cope with fast-changing PLCs and also helps in cutting handset prices. Local operations will also help in reducing the product development cycle, which can be reduced to less than six months: starting right from basic design through to industrial design, testing, compatibility test, debugging, testing the product, commercial manufacturing, and distribution. And this cycle will reduce further software customization being done locally.

FY 2004–05 saw emergence of smartphones and PDAs in the Indian market from brands like: O2, Krome, BlackBerry, and HP. O2 phones are sold in India by Creative-e-biz.com, which currently has around 100 dealers. Blackberry is sold exclusively through Bharti.

New Players
Chinese players: Huawei, ZTE, Utstarcom, and Haier are looking at the Indian market aggressively, both in CDMA as well as GSM space.

In February 2005, Haier Appliances India has entered the Indian GSM market. The company has launched around seven models in the country, ranging from Rs 3,500–1,400. The company is planning to launch 10 more models in FY 2005–06. In India, the company launched the world's slimmest camera phone, pen phone with camera and voice recording (ideally suited for doctors and journalist), phone with MP3 and stereo speakers, phone with FM radio, and camera phone. In the CDMA space, it is looking at the entire range. And is working closely with the operators to get a substantial market share in India.

ZTE, the Chinese player, has opened its account and has bagged orders to the tune of around Rs 20 crore.

Huawei is also planning to launch both GSM and CDMA handsets in the country. The company is looking at all the segments-low, middle, and high. For GSM, the company is talking to channel partners and for CDMA, it is in talks with BSNL and MTNL.

UTStarcom is planning to launch phones in the all the categories: in the low-end category phones like C1000, C1100, and C1222; and in the color and camera categories phones like CDM7000, CDM7100, and CDM7200

Future Challenges
Mobile phones have moved to the masses in urban areas but the real challenge is how to address semi-urban and rural areas and achieve the 250 million mark by 2007. It is not an easy task and will require the service providers, vendors, and channel partners to work together so that India can achieve the high telephone penetration levels.

The first challenge is to enhance the distribution channel, so that it is able to cater to the semi-urban and rural environments. Second challenge is the high level of localization as the power situation in these areas is erratic and the interface of the phones will have to be in local languages. The third challenge is to ensure that these phones are available at a cost that will be within the reach of a large population in the semi-urban and rural areas.

Pravin Prashant